1. What are the major factors that determine investment, and what impact does each have on aggregate demand?

1. In the following table, determine how each event likely effects potential output (a.k.a., long-run aggregate supply).    Direction of Potential Output Shift Event Left Right No Shift The government allows more immigration of working-age adults.       For environmental and safety reasons, the government requires that the country’s nuclear power plants be permanently shut down.       An investment tax credit increases the rate at which firms acquire machinery and equipment.         2. In the following table, determine how each event affects the position of the aggregate demand curve.    Direction of AD Curve Shift Event Left Right No Shift A decrease in consumer confidence (suggests people believe a contraction/recession coming)       A decrease in individual income tax rates       An increase in the value/price of housing         3. What effect would an increase in aggregate demand…

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Suppose home owners owe $8 trillion in mortgage loans. a. If the mortgage interest rate is 4 percent, approximately how much are home owners paying in annual mortgage interest?        $  billion   b. If the interest rate drops to 3.5 percent, by how much will annual interest payments decline?        $  billion   c. How will this change in the interest rate impact aggregate demand?        Aggregate demand will              .

28. Which of the following are determinants of aggregate demand? Choose all that apply. A. a spike in net exports B. the Federal Reserve lowering its interest rates C. a change in technology D. growing consumer confidence

1.Does the Aggregate Demand (AD) curve always slope downward? Discuss and use explanations (interest rate effect, wealth effects, open economy effect to illustrate your answer).

3. Under what circumstances an aggregate demand curve would shift either to the right or left? Provide some real world examples.